Home Equity Line of Credit FAQs
What is home equity?
How does a home equity line of credit (HELOC) work?
With a home equity line of credit (HELOC) from UW Credit Union, you can borrow up to 100% of your home’s equity as a line of credit. It’s very convenient, and it works similarly to a credit card. Borrow what you need, when you need it, until you reach your credit limit. Here are more details about using your HELOC:
Withdrawing money during the draw period: This is the set amount of time (usually five years) that you can borrow from your line of credit. You can extend your draw period, depending on your credit situation.
Repaying during the draw period: During the draw period, you can make the minimum payments on what you’ve borrowed, however we encourage paying more to reduce the balance.
Repayment period: Once the draw period ends, you won’t be able to withdraw funds. At this point, your loan enters the repayment period, when your payments will include both principal and interest. These payments will be a lot higher than the interest-only payments you made during the draw period.
What's the difference between a home equity line of credit and a home equity loan?
When you take out a home equity loan, the interest rate is fixed, and you get the money in one lump sum. Your payments remain the same, and your rates won’t change over the term of the loan.
In contrast, a home equity line of credit (HELOC) typically has a variable interest rate—although UW Credit Union offers the option to lock in at low fixed rate. Also, a HELOC allows you to withdraw funds when you need them, up to your credit limit, during the term of the loan. For more details, check out this article.
How do you come up with a value for my home?
There are a couple ways we obtain a value for your home for the purposes of a home equity line of credit.
- An electronic report called an Automated Valuation Model
- An appraisal ordered by UW Credit Union (an additional cost applies)
The valuation option used depends on multiple criteria and is dependent on your request and personal situation. In most cases, an appraisal is not required.
When does the introductory rate on the home equity line of credit start? How long does it last?
The introductory rate on the home equity line of credit begins as soon as you have access to the line of credit. Typically, this is three business days after your loan closing. The introductory rate is in effect for 12 months. After that, any balances will be at the standard rate which is indexed to The Wall Street Journal Prime Rate.
How long does my home equity line of credit stay open?
Your home equity line of credit includes a five-year draw period which allows you access to the funds in your line of credit. At the end of the draw period, qualified borrowers may choose to renew the line of credit for another five-year draw period. Draw period renewal is free with a Value or Premium checking account or a $100 fee applies. Qualified borrowers may choose to renew the draw period up to two times.
How do I access the funds of my home equity line of credit?
There are several easy ways to access the funds in your line of credit.
- Transfer funds from your line of credit to another UW Credit Union account directly from Web Branch.
- Visit a branch to get a cashier’s check.
- Request checks for your home equity line of credit.
What is the highest rate that a home equity line of credit can have?
The APR is subject to change monthly but cannot exceed 18%. APRs on the home equity line of credit also have a floor rate, depending on the product type.